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SEC issues $59 million in whistleblower awards
On May 19, the SEC announced that it awarded a whistleblower more than $28 million for providing information that, according to the redacted order, prompted the SEC and another agency to open investigations that resulted in significant enforcement actions. The SEC notes that under its whistleblower program, individuals who provide information to other agencies “may be eligible for an award in the related action if they are also eligible for an award in the underlying SEC action.”
Earlier, on May 17, the SEC announced whistleblower awards to four individuals totaling nearly $31 million for information provided in two different enforcement actions. According to the first redacted order, the SEC jointly awarded nearly $27 million to two claimants who voluntarily provided new information and ongoing assistance throughout an investigation that led to successful enforcement actions. In the second redacted order, the SEC awarded two other whistleblowers a total of approximately $3.8 million. The first whistleblower received a roughly $3.75 million award for voluntarily providing “original information to the Commission that contributed to an existing investigation” that led to a successful enforcement action. The second whistleblower received approximately $750,000 for providing “information that the staff previously lacked and that was useful in negotiating a settlement of one of the proceedings.” Though both whistleblowers independently provided information that was relevant in the ongoing investigation, the whistleblower who received the larger award supplied information and assistance that was more significant to the enforcement action.
The SEC has awarded approximately $901 million to 163 individuals since issuing its first whistleblower award in 2012.
Broker-dealer settles with SEC for failing to file SARs
On May 12, the SEC announced a settlement with a broker-dealer for allegedly violating the Securities and Exchange Act by failing to consistently implement its anti-money laundering (AML) program and file Suspicious Activity Reports (SARs) despite knowing individuals were attempting to gain unauthorized access to retirement accounts. According to the SEC’s order, from September 2015 through October 2018, the broker-dealer allegedly knew that individuals were attempting to gain access, or had gained access, to plan participants’ retirement accounts through the use of improperly obtained personal identifying information. The SEC alleged that, despite this knowledge, the broker-dealer failed to file approximately 130 SARs in cases where it had detected the suspicious activity and, in the roughly 297 SARs that it did file, failed to include certain required information linked to the bad actors, such as URL addresses, IP addresses, and other electronic identifying information. The order requires the broker-dealer, who has neither admitted nor denied the SEC’s allegations, to cease and desist from future violations and pay a $1.5 million penalty. The SEC acknowledged the broker-dealer’s significant cooperation in the investigation and subsequent remedial efforts.
SEC issues more than $25.6 million in whistleblower awards
On May 12, the SEC announced a whistleblower award totaling around $3.6 million in connection with a successful enforcement action. According to the redacted order, the whistleblower provided new information that lead to the initial charges as well as “ongoing assistance as the Commission’s investigation progressed.”
Earlier on May 10, the SEC also announced whistleblower awards totaling approximately $22 million in connection with a successful enforcement action. According to the redacted order, the SEC awarded a whistleblower approximately $18 million for providing (i) information that led to the opening of the investigation brought against a financial services firm, and (ii) ongoing assistance during the investigation. The second whistleblower received a $4 million award for submitting information after the investigation began. The SEC noted that both whistleblowers provided information and cooperation that “allowed the Commission to better understand complex transactions related to the matters under investigation.”
The SEC has awarded approximately $842 million to 157 individuals since issuing its first award in 2012.
SEC issues over $3 million in whistleblower awards
On April 23, the SEC announced whistleblower awards totaling more than $3 million in two separate enforcement actions. According to the first redacted order, the SEC awarded a whistleblower approximately $3.2 million for alerting enforcement staff to violations, identifying key issues for staff to focus on, and providing a “roadmap” for staff that conserved resources. However, the SEC noted that the whistleblower “unreasonably delayed” reporting the information to the Commission—it was submitted approximately four years after the date on which the whistleblower first noticed the misconduct—during which “investors continued to suffer harm.”
In the second redacted order, the SEC awarded a whistleblower more than $100,000 for providing information (of which “there was substantial law enforcement interest”) that assisted the Commission’s investigation and “was one of the underlying sources that formed the basis for the charges in the Covered Action.” The SEC noted that the whistleblower provided helpful assistance and suffered personal and professional hardships as a result.
SEC awards $50 million to whistleblower
On April 15, the SEC announced an award of more than $50 million to joint whistleblowers in connection with violations that involved highly complex transactions that would have been difficult to detect without their information. According to the redacted order, the joint whistleblowers “assistance was critical to staff’s ability to identify and investigate the unlawful securities violations,” including meeting with staff numerous times and providing voluminous detailed documents, which led to the return of tens of millions of dollars to harmed investors.
The SEC has now awarded approximately $812 million to 151 individuals since it issued its first award in 2012.
Firm settles with FINRA on AML compliance violations
On April 12, the Financial Industry Regulatory Authority (FINRA) entered into a Letter of Acceptance, Waiver, and Consent (AWC), fining a New York-based member firm for allegedly failing to implement a reasonable anti-money laundering (AML) program for transactions involving low-priced securities. The firm also allegedly failed to establish a due diligence program for monitoring and investigating “potentially suspicious transactions.” According to FINRA, the firm and its principal failed to, among other things, (i) take reasonable steps to establish and implement an AML program tailored to the firm’s new business line (and particularly the deposit and liquidation of microcap stocks), resulting in the firm’s failure to identify or investigate potentially suspicious transactions; and (ii) provide meaningful guidance regarding how the principal was to identify or review red flags specific to the customer account business. In addition, FINRA allegedly found that the principal “repeatedly” permitted deposits and re-sales of microcap securities despite missing documentation. As a result, the firm and its principal violated FINRA Rules 3310(a) (Anti-Money Laundering Compliance Program), 3110(a) (Supervision) and 2010 (Standards of Commercial Honor and Principles of Trade).
SEC awards approximately $2.5 million to whistleblower
On April 9, the SEC announced an approximately $2.5 million whistleblower award in connection with a successful enforcement action. According to the redacted order, the whistleblower supplied information that led to charges related to a breach of fiduciary duties owed to investors, provided significant ongoing assistance to enforcement staff, and reported the information internally to the company.
The SEC has now paid approximately $762 million to 148 individuals since the inception of the whistleblower program in 2012.
FINRA fines broker-dealer for alleged supervision failures
On April 5, the Financial Industry Regulatory Authority (FINRA) entered into a Letter of Acceptance, Waiver, and Consent (AWC), with a New York-based broker-dealer subsidiary of a global financial services company to resolve allegations that it failed to monitor employees’ outside brokerage accounts for “potentially deceptive trading practices.” Among other things, FINRA alleged that the firm’s failure to maintain a supervisory system to ensure employees disclosed their outside brokerage accounts precluded the personal account trading team from accurately monitoring account activity for compliance with the firm’s trading restrictions. FINRA further indicated that “[w]hile the firm ultimately was able to review the relevant trading activity, the inability to do so earlier led to the firm’s failure to timely monitor trading in these accounts.” The firm neither admitted nor denied the findings set forth in the AWC letter but agreed to pay a $345,000 fine.
SEC awards more than $500,000 to whistleblower under “safe harbor” provision
On March 29, the SEC announced a more than $500,000 whistleblower award in connection with an enforcement action. According to the redacted order, the whistleblower raised concerns about alleged securities violations internally, which prompted an investigation by the company. The company then reported the information to an outside agency, which in turn made a referral to Commission staff, thus prompting the opening of the SEC’s investigation. The SEC noted that the whistleblower also provided helpful documents and met with Commission staff, allowing the SEC and another agency to quickly file actions and shut down the ongoing fraudulent scheme. Additionally, the SEC explained that because the whistleblower also submitted a tip to the SEC within 120 days of reporting the violations internally to the company, the whistleblower satisfied the SEC’s whistleblower rule’s “safe harbor” provision, thereby allowing the SEC to treat the whistleblower’s information “as though it had been made on the date that the [whistleblower] provided that same information to his/her employer[].”
The SEC has now paid approximately $760 million to 145 individuals since the inception of the whistleblower program in 2012. The Commission noted that, with this award, it has now “awarded 40 individuals this fiscal year, surpassing last year’s record of 39 individual awards,” and has “awarded whistleblowers nearly $200 million in the first half of FY21 alone.”
Digital asset company to pay $6.5 million to settle CFTC allegations
On March 19, the CFTC announced a $6.5 million settlement with a California-based digital asset company to resolve allegations of false, misleading, or inaccurate reporting concerning its digital asset transactions that violated the Commodity Exchange Act or CFTC regulations. According to the CFTC, from January 2015 to September 2018, the company allegedly operated at least two trading programs that generated orders that, at times, matched each other. The CFTC claimed, among other things, that the transactional information provided on the company’s website and given to reporting services resulted “in a perceived volume and level of liquidity of digital assets. . .that was false, misleading or inaccurate.” Additionally, the CFTC alleged that the company was vicariously liable for a former employee’s use of “a manipulative or deceptive device” to intentionally place buy and sell orders that matched each other, creating a misleading appearance of interest in certain cryptocurrencies. The company did not admit or deny the CFTC’s findings and agreed to pay a $6.5 million civil penalty.